May 2, 2023/CSL Research
Zenith Bank’s Q1 2023 unaudited numbers showed 51.6% y/y growth in Interest Income driven by growth in Interest Income on both Net Loans and Investment Securities. Net Loans to Customers grew 13.4% y/y but was up only 0.4% in Q1 relative to December 2022. Interest Expense grew strongly, up 174.1% y/y, resulting in an increase in cost of funds to 2.7% from 1.3% in Q1 2023. Customer Deposits were up 26.0% y/y but grew only 1.8% in March 2023 compared with December 2022. Overall, Net Interest Income grew 20.1% y/y while Net Interest Margins (NIMs) declined to 6.9% in Q1 2023 compared with 7.3% for Q1 2022.
| Q1 2023 Nm |
Source: Company, CSL Research.
Other Income (Trading gains and Other Operating Income) was up 62.6% y/y mainly due to N4.7bn reported as Other Operating Income compared with a loss of N8.9bn in March 2022, which was tiggered by a N10.5bn FX revaluation loss.
Impairment charge grew moderately, up 14.4% y/y to N7.7bn in Q1 2023 from N7.7bn in Q1 2022, bringing Q1 2023 annualised Cost of Risk (COR) to 0.7% compared with 0.8% for Q1 2022.
OPEX grew 19.5% y/y. The lower y/y growth in Opex when compared with 22.7% y/y growth in Total Operating Income led to a marginal improvement in Cost to Income Ratio (ex-provisions) to 51.3% for Q1 2023 compared with 52.6% in Q1 2023.
Overall, PBT grew 27.4% y/y to N86.6bn for Q1 2023 while Net Profit grew 13.4% y/y to N66.0bn bringing Q1 2023 annualised ROAE to 18.7% compared with 17.8 % for March 2022.
The bank still rates well based on capital adequacy (CAR 19.5% down marginally from 19.8% in December 2022), sustainable long-term dividend yield, and stable asset quality.
We have a Buy recommendation on the stock with a target price target of N37.60/s. Current Price N22.80/s.
